Bloomberg terminal story goes global - Top questions in the IRS scandal - GOP battles over economic policies - Feds may repropose mortgage rule - Economy set to grow but very slowly

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BLOOMBERG TERMINAL STORY GOES GLOBAL — Peter Hannam in The Sydney Morning Herald: “The surprise surrounding the crisis engulfing global business news giant Bloomberg may only be that it has taken so long to erupt. Both the U.S. Treasury … and the Federal Reserve are reported to be examining the extent to which Bloomberg reporters tracked officials' use of information carried on the Bloomberg terminal. … Bloomberg employees are even said to have accessed details of ex-Fed chief Alan Greenspan's contacts with the company's help desk. … Bloomberg's chief executive Dan Doctoroff has declared the practice a ‘mistake’, and company executives have reportedly apologised in person to executives of Goldman Sachs.

“Whether the aggrieved customers will be satisfied with reduced reporter access remains to be seen, although apparently none of Bloomberg's 315,000 paying customers is known to have cancelled the service over the breach. Even 10 years ago, many Bloomberg employees were familiar with the internal function on the terminal that allowed them to observe client use. The so-called UUID function identifies, for instance, whether a customer is interested in equities or bonds by revealing the number of times certain category keys are tapped. … One ex-Bloomberg employee has told CNBC … that he accessed usage information about Federal Reserve Chairman Ben Bernanke and former U.S. Treasury Secretary Tim Geithner.” http://bit.ly/16tAubr

M.M. HEARS … From a person familiar with the Bloomberg snooping scandal: “The business-side folks at Bloomberg are furious at the news operation. They thought the news desk had shut down all access in 2011 after Eric Schatzker mentioned something on air that involved client data. And yet, some of these functions were still in wide use on the news side, and senior editors at news must have known.”

A DATA COMPANY AT HEART — WSJ’s William Launder: “Bloomberg LP has raised its profile as a news organization significantly in recent years. ... The company's roots and core business, though, are in providing financial data, a fact highlighted by its journalists' ability, until recently, to look up some information about subscribers to Bloomberg's financial terminals. … In its early years, Bloomberg reporters sometimes accompanied salespeople to client meetings, and they were granted access to subscriber information such as broad usage habits to help them participate in the discussions, according to the company. In later years, when Bloomberg grew bigger and journalists participated less in client meetings, Bloomberg didn't eliminate newsroom access to such information, the company says. http://on.wsj.com/10COTe5

BLOOMBERG RESPONDS — Bloomberg editor-in-chief Matthew Winkler in an op-ed: “Our client is right. Our reporters should not have access to any data considered proprietary. I am sorry they did. The error is inexcusable. Last month, we immediately changed our policy so that reporters now have no greater access to information than our customers have. … Now let’s also be clear what our reporters had access to. First, they could see a user’s login history and when a login was created. Second, they could see high-level types of user functions on an aggregated basis, with no ability to look into specific security information. This is akin to being able to see how many times someone used Microsoft Word vs. Excel. And, finally, they could see information about help desk inquiries.

“At no time did reporters have access to trading, portfolio, monitor, blotter or other related systems. Nor did they have access to clients’ messages to one another. They couldn’t see the stories that clients were reading or the securities clients might be looking at. … Our editorial and reporting standards have been among the most stringent in the business for more than 20 years. We apologize for our error as it does not reflect on our culture or our heritage. And we will strive to continue to uphold the highest standards while adhering to the best practices in the industry as long as we may be fortunate to serve our customers as they would have us serve them.” http://bloom.bg/10RtHQp

TOP QUESTIONS IN THE IRS SCANDAL — POLITICO’s Lauren French: “A classic Washington scandal is unfolding — complete with accusations of lies, abuse of power and questions about cover ups. To add to the intrigue, it involves one of the most hated government agencies: the Internal Revenue Service. It all started Friday, when an IRS official — in an apparently off-handed remark — acknowledged and apologized for wrongly targeting conservative groups seeking nonprofit status. … Republicans … are calling for additional investigations. … What did senior IRS officials know; when did they know it; and were any laws broken? This is what’s clear: Low-level employees in the IRS’s Cincinnati office began flagging conservative groups as early as 2010. … For now, it appears that the Cincinnati employees took the initiative on their own to start flagging the applications. …

“What does this mean for the Obama administration? The IRS developments couldn’t come at a worse time for the White House, which has spent months courting GOP support for everything from gun control to an overhaul of immigration laws. If the administration’s recent GOP charm offensive bought any goodwill, it seems to be on short supply now. Sen. Susan Collins (R-Maine) is exactly the type of moderate lawmaker who might support the administration’s policy goals. But she made clear on Sunday that she isn’t pleased with how the White House — and President Barack Obama in particular — is handling the IRS debacle.” http://bit.ly/10GPIHE

GOP BATTLES OVER ECONOMIC POLICIES — National Journal’s Nancy Cook is on MSNBC’s “Daily Rundown” at 9:30 a.m. to talk about her cover piece: “Much of the difficulty … boils down to Republican economic beliefs that have moved too far away from what most people care about. ‘We’re not talking enough about the problems that affect the lives of everyday Americans,’ says Yuval Levin, a fellow at the Ethics and Public Policy Center. … ‘What do our ideas have to do to address this moment?’ … [P]arty intellectuals fear that Republicans in power have not introduced enough ideas that middle-class people like, such as ways to reform education, boost wages, shrink the high cost of a college degree or create more jobs in a weak labor market.” http://bit.ly/ZZC5ly

THIS MORNING ON POLITICO PRO FINANCE – Jon Prior on the possibility of regulators re-proposing a key mortgage rule. To learn more about Pro's subscriber-only coverage — and to get Morning Money every day before 6 a.m. — please contact Pro Services at (703) 341-4600 or info@politicopro.com.

GOOD MONDAY MORNING — M.M. is on CNBC’s “Power Lunch” in the 1 p.m. hour to talk about the growing Bloomberg terminal snooping scandal as well as the Fed and markets. As always, send your tips and comments: bwhite@politico.com; and follow on Twitter: @morningmoneyben and @POLITICOPro.

DRIVING THE WEEK — President Obama has a meeting with U.K. Prime Minister David Cameron this morning at the White House … Obama and Cameron hold a joint press conference in the Rose Garden later in the morning … In the afternoon, Obama heads to NYC for a trio of fundraisers, two for the DNC and a joint DCCC/DSCC event at the Waldorf … CBO this week releases its analysis of President Obama’s FY 2014 budget proposal, including estimates based on the impact of sequestration and the fiscal cliff deal … National Association of Realtors holds its mid-year legislative meeting in D.C. starting Monday … Senate Banking has a hearing Tuesday at 3:15 p.m. on attracting more private capital into the mortgage market …

AEI has an event on the future of Fannie Mae and Freddie Mac on Wednesday at 2 p.m., including remarks from former NEC member James Parrott … Retail sales this morning at 8:30 a.m. EST expected to drop 0.3 percent, 0.2 percent ex-autos … Industrial production at 9:15 a.m. on Wednesday excepted to drop 0.1 percent … Housing starts at 8:30 a.m. Thursday expected to rise to 920,000 from 907,000 … Consumer prices 8:30 a.m. Thursday to drop 0.3 percent overall and rise 0.2 percent ex-food/fuel … University of Michigan Consumer Sentiment at 9:55 a.m. Friday expected to rise to 77.9 from 76.4.

MOOD MUSIC: ECONOMY SET TO GROW BUT VERY SLOWLY — WSJ’s Ben Casselman and Phil Izzo: “After four years of crises, foreign and domestic, that threatened to plunge the U.S. economy back into recession, the road ahead at last looks comparatively free of roadblocks. But progress remains slow, and there is little reason to expect meaningful acceleration. … First, the good news: The housing market, whose crash sparked the financial crisis more than five years ago, is at last showing signs of a sustained rebound. Europe remains mired in a recession, but the threat of an out-and-out collapse appears to have faded. … Federal budget cuts and political squabbling have slowed growth and increased uncertainty, but Washington's enthusiasm for turmoil-inducing brinkmanship has shown signs of fading. Freed from the cycle of crises, the economy appears to have found some stability.

“Overall growth has rebounded from a soft patch at the end of last year, consumers have continued to spend in the face of tax increases, and employers added 165,000 jobs in April. … Layoffs have fallen to a five-year low. Experts expect the steady path to continue. In the latest Wall Street Journal survey of economists, forecasters said they expect employers to add just under 180,000 jobs a month over the next 12 months, about the same pace as the past two years. They think overall economic growth has slowed somewhat from the first three months of the year but will quickly rebound; for the full year, economists expect 2.4 percent growth.” http://on.wsj.com/15DTvZn

IRS SCRUTINY WENT BEYOND TEA PARTY — NYT’s Jonathan Weisman and Matthew L. Wald on Page A1: “The [IRS] special scrutiny of small-government groups applying for tax-exempt status went beyond keyword hunts for organizations with ‘tea party’ or ‘patriot’ in their names to a more overtly ideological search for applicants seeking to ‘make America a better place to live’ or ‘criticize how the country is being run,’ according to part of a draft audit by the inspector general that has been given to Capitol Hill. The head of the division on tax-exempt organizations, Lois Lerner, was briefed on the effort in June 2011, seemingly contradicting her assertion on Friday that she learned of the effort from news reports.

“But the audit shows that she seemed to work hard to rein in the focus on conservatives and change it to a look at any political advocacy group of any stripe seeking tax exemptions. The new information will only add to the criticism that has emerged since Ms. Lerner apologized to tea party and other conservative groups on Friday for unwarranted scrutiny. The full audit by the Treasury Department’s Inspector General for Tax Administration is set to be released this week. House Republicans have vowed to begin their own hearings and investigations.” http://nyti.ms/13rM0RJ

DUAL-TRACK SYSTEM TO REPLACE LIBOR? — FT’s Brooke Masters: “The scandal-plagued Libor benchmark is likely to be replaced by a dual-track system with survey-based lending rates running alongside transaction-linked indices as soon as next year. Martin Wheatley, the U.K. regulator leading efforts to reform the London Interbank Offered Rate, told the [FT] that a parallel system would provide continuity for holders of $350 trillion in existing contracts that reference Libor while also paving the way for a new benchmark tied more closely to objective data. But the idea could set up a conflict with U.S. regulators, who recently called for a ‘prompt’ switch to transaction-based rates. Gary Gensler, chairman of the [CFTC] … told the FT that the existing system was ‘unsustainable’ in the long run because banks were not doing enough unsecured lending to make accurate estimates.” http://on.ft.com/18EC1L3

ALSO FOR YOUR RADAR –

M.M. BOOK CORNER: THE MAKING OF DODD-FRANK — POLITICO’s Jonathan Martin writes in WSJ on Robert G. Kaiser’s new book on the making of Dodd-Frank: “Congress is dominated by intellectual lightweights who are chiefly consumed by electioneering and largely irrelevant in a body where a handful of members and many more staff do the actual work of legislating. And the business of the institution barely gets done because of a pernicious convergence of big money and consuming partisanship. … What makes ‘Act of Congress’ a somewhat surprising addition to the ‘broken Congress’ genre is that Dodd-Frank would seem to be an example of the system working: Politicians responded to the perceived needs of their constituents, and a bill was passed. Yet, Mr. Kaiser argues, the process itself illustrated what's wrong with Washington, and the legislation ultimately passed more because of luck and circumstance than the wisdom of judicious lawmakers.”

“Messrs. Dodd and Frank had to fend off the big banks looking to avoid new regulations on one side and liberals pushing for unattainable new rules on the other. Hoping to keep the African-American members of his committee on board, Mr. Frank at one point summoned Goldman Sachs CEO Lloyd Blankfein to Washington to see if the banker could help restructure some debt that the country's largest minority-owned broadcasting company owed to Goldman. Mr. Frank … sheepishly told Mr. Kaiser that he ‘never got into anything specific’ with Mr. Blankfein.” http://on.wsj.com/ZSTXuU

DIMON VOTE MAY HINGE ON RAYMOND — NYT’s Jessica Silver-Greenberg and Susanne Craig: “In his 12 years as chief executive of Exxon Mobil, Lee R. Raymond had a reputation for bulldozing analysts and long-winded shareholders. … Now as the lead director on the board of JPMorgan Chase, a crucial shareholder vote on splitting Jamie Dimon’s jobs as chief executive and chairman could hinge on whether the 74-year-old Mr. Raymond is seen as strong enough to stand up to Mr. Dimon. … Yet a year after the bank posted a multibillion-dollar trading loss that has helped drive out top lieutenants, spurred federal inquiries and prompted Congressional hearings, a growing number of investors are questioning whether Mr. Raymond has done enough to fortify risk controls and root out problems. …

“For some investors, the nonbinding vote, the result of which will be announced on May 21, is about good governance, not personalities. … But other shareholders say they are taking a close look at Mr. Raymond and his role at JPMorgan, saying they need to figure out whether he has been an effective counterbalance to Mr. Dimon. If not, they said, they will probably vote to split the roles and push the board to find a chairman. … [Raymond] has his defenders, who say he is a strong leader and a driving force behind decisions to claw back millions of dollars in compensation from executives at the center of the botched trades.” http://nyti.ms/16t2c8b

FED EYES END TO EASING — WSJ’s Jon Hilsenrath on Friday: “Federal Reserve officials have mapped out a strategy for winding down an unprecedented $85 billion-a-month bond-buying program meant to spur the economy — an effort to preserve flexibility and manage highly unpredictable market expectations. Officials say they plan to reduce the amount of bonds they buy in careful and potentially halting steps, varying their purchases as their confidence about the job market and inflation evolves. The timing on when to start is still being debated.

“Officials are focusing on clarifying the strategy so markets don't overreact about their next moves. For example, officials want to avoid creating expectations that their retreat will be a steady, uniform process like their approach from 2003 to 2006, when they raised short-term interest rates in a series of quarter-percentage-point increments over 17 straight policy meetings. ‘I don't want to go from wild turkey to cold turkey,’ Richard Fisher, president of the Federal Reserve Bank of Dallas, said in an interview Friday. ‘I think we ought to dial it back.’ Mr. Fisher is part of a contingent of Fed hawks who are wary of the central bank's easy-money policies.” http://on.wsj.com/17Wr1aI

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